Earnings, French election weigh on liquidity; Great Plains retreats; Anthem weakens

By Stephanie N. Rotondo

Seattle, April 21 – Trading in the convertible bond market was muted going into Friday’s session, according to one sellside source.

He noted that earnings season was playing a role, as investors waited to see how the first quarter fared. He also remarked that “everything is on hold for the French election.

“Everybody’s using that as an excuse,” he added.

That race has been contentious, with at least four different candidates on the block, representing the far-left to the far-right.

The mandatory convertible preferred space was on the active side, however. A trader commented that such securities “trade well,” given that they are “fairly easy to track.”

“They really trade efficiently,” he said.

Great Plains Energy Inc.’s 7% series B mandatory convertible preferred stock (NYSE: GXPPrB) remained notable, as the market digested news from Wednesday regarding the company’s proposed merger with Westar Inc.

As previously reported, regulators at Kansas Corporation Commission unanimously voted against the $12.2 billion merger.

Anthem Inc.’s 5.25% equity units due 2018 (NYSE: ANTX) were also busier, following reports out Thursday that the health insurance company was in talks with the Justice Department over its merger with Cigna Corp.

Anthem denied the reports, however.

Rounding out the space, Virtus Investment Partners Inc.’s 7.25% series D mandatory convertible preferreds (Nasdaq: VRTSP) were active as the issue was added to the S&P U.S. Preferred Stock index.

The $100-par issue – which priced Jan. 17 – closed the day 3 cents higher at $101.

As for the straight convertible market, Newmont Mining Corp.’s 1.625% convertible notes coming due in July were being eyed, as investors reacted to news the company planned to expand its gold production.

The company’s stock was also reacting well to the news.

Great Plains gives back

Great Plains Energy’s 7% $50-par mandatory convertible preferreds continued to be active on Friday, though the paper was giving up some of the previous day’s gains.

The preferreds were seen off 15 cents at $54.10.

The underlying common stock was initially higher as the day started but eventually finished flat at $24.55.

It was reported on Wednesday that the Kansas Corporation Commission unanimously voted against Great Plains’ proposed merger with Westar. Great Plains first announced its intent to acquire Westar in May 2016. In September 2016, shareholders at both companies overwhelmingly approved the deal.

But regulators at the KCC ultimately voted against the merger, saying that there were not enough provisions in the plan to protect consumers.

“Unfortunately, the transaction was presented to the commission as a take it or leave it proposal,” the commissioners wrote in their decision. “Repeatedly, the joint applicants advised the commission that any significant safeguards that would protect consumers, such as maintaining a separate, independent Westar board of directors, would halt the transaction. Therefore, the proposed transaction could not be salvaged and the commission was left with no choice but to reject the proposed transaction.”

In light of the KCC’s decision, Great Plains pulled its application from the Missouri Public Service Commission, which also wanted to weigh in on the deal, given that the merger would have given the company customers across state lines.

Neither Great Plains nor Westar have said much about its plans going forward, other than to say that they are reviewing their options.

Should the deal completely collapse before May 31, Great Plains will have to pay Westar a $380 million termination fee. However, that date could be extended to Nov. 30 in certain circumstances.

Anthem dips on merger buzz

Anthem’s 5.25% equity units were getting hit on Friday amid reports the company was in talks with the Justice Department to salvage its merger with Cigna.

The units were off $1.58, or 3.16%, at $48.46, in well above-average trading. The company’s shares were down 24 cents at $167.83.

The health insurance company is waiting to see is a federal appeals court will allow its merger with Cigna to go through. Anthem filed the appeal after the Justice Department put the kibosh on the $54 billion merger due to antitrust issues.

However, Anthem shot down the reports, with a spokesperson saying the buzz was “not accurate.”

The combination of Anthem and Cigna would have created the largest U.S. insurance company. In addition to the antitrust obstacles, Anthem and Cigna have been at each other’s throats since the deal’s breakdown. Cigna fired the first shot, stating that the merger agreement was broken once the DOJ put its foot down. Anthem fired back, alleging that the filing of the lawsuit on Cigna’s part amounted to “sabotage.”

Newmont notable

Newmont Mining’s 1.625% convertible notes were little changed on Friday, though they were fairly active.

A market source saw the issue up a shade, just north of par.

As for the equity, it was up 46 cents, or 1.37%, at $34.13.

The movement in the securities came as the Greenwood Village, Colo.-based company announced that it was adding more capacity to its Ahafo operations in an effort to dig out more gold.

Andrew Kaip, an analyst at BMO Capital Markets, said the news was positive for the company.

“During the first five years of full production from 2020 through 2024, [Newmont] estimates that the projects will add incremental gold production of 200-300koz, in line with our expectations,” Kaip wrote in a report out Friday.

BMO has an “Outperform” rating on the stock and a price target of $40.00.

Mentioned in this article:

Anthem Inc. NYSE: ANTM

Great Plains Energy Inc. NYSE: GXP

Newmont Mining Corp. NYSE: NEM

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